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Recovery Options for Investors with Investment Losses in Chesapeake Energy Corp. Bonds

The Wolper Law Firm, P.A. is currently investigating claims against FMS Bonds and other broker-dealers that recommended that customers concentrate their accounts in bonds issued by Chesapeake Energy Corp., which filed for Chapter 11 bankruptcy protection in June 2020. The bankruptcy impacts billions of dollars in corporate debt held by retail investors.

What Happened to Chesapeake Energy Corp.

Chesapeake Energy Corp. is an energy company based out of Oklahoma with a focus natural gas exploration and production.  Chesapeake Energy Corp. is one of the pioneer companies in the United States’ energy production. Chesapeake Energy has been in financial trouble for an extended period of time and, accordingly, has carried a credit rating of below investment grade. For this reason, the bonds issued by Chesapeake Energy Corp. are “junk bonds.”

Junk bonds, including those issued by Chesapeake Energy Corp. are considered speculative because the issuer has an elevated risk of default, which would result in bond losses—the investor losing all of his/her principal.

Chesapeake Energy Corp. had an immediate and predictable collapse. The company was forced to restructure several of its bond offerings in order to make interest payments and remain solvent.  By September 2019, Standard & Poor’s further downgraded Claimant’s bonds to “D”, which means it “is in default or in breach of an imputed promise…The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty…A rating on an obligation is lowered to ‘D’ if it is subject to a distressed exchange offer.” 

Recourse for Investors who Suffered Bond Losses

Prior to recommending Chesapeake Energy Corp., FMS Bonds and other broker-dealers had a regulatory obligation to conduct due diligence on Chesapeake Energy Corp. and understand the credit risk of the company. Moreover, FMS Bonds and other broker-dealers had an obligation to fully disclose those risks to customers and ensure that they appreciated those risks.  Absent full disclose, customers who invested in Chesapeake Energy Corp. bonds may have recourse against the brokerage firm to recover investment losses.

Failure to disclose the characteristics and risks of a bond may also constitute bond fraud. Federal and state securities laws protect customers who are victims of material misrepresentations or omissions, which constitute bond fraud, bond losses, and junk bonds.

Contact the Wolper Law Firm to Explore Your Legal Options to Recover Chesapeake Energy Corp. Losses 

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at 800.931.8452 or by email at mwolper@wolperlawfirm.com.

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